In: Finance
A 10-year, 10% coupon bond, semi-annual payments, $1,000 Par, is expected to make all coupon payments but to pay only 50% of par value at maturity. What is the expected yield on this bond if the bond is purchased for $975?
a. 10.00% |
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b. 6.77% |
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c. None of the options are correct. |
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d. 11.68% |
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e. 6.68% |
Semi-annual coupon = 1000*10%*6/12 = 50
Maturity value = 1000*50% = 500
Total payments = 10*2 = 20
Using calculator
Calculator | |
Inputs: | |
PV | (975.000) |
PMT | 50.00 |
FV | 500.00 |
N | 20 |
Output: | |
I/Y = IRR | 3.385039% |
Annual YTM | 6.77008% |
Answer is:
6.77%
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